Fund managers across North America, Europe and Asia Pacific were collectively responsible for real estate assets worth EUR2 trillion (gross) in 2015, according to the INREV/ANREV/NCREIF Fund Manager Survey 2016.
This total is more than 10 per cent higher than the EUR1.8 trillion total recorded in 2014.
The survey shows that the ‘urge to merge’ is alive and well in the industry, with one in five fund managers saying they have been involved in M&A activity over the last 10 years. The result of this trend towards consolidation is that the biggest fund managers have been getting even bigger. Taken together, the top ten fund managers were responsible for around 40% of the total assets under management (AUM).
The most prominent example of this is TIAA’s acquisition of TH Real Estate, helping to propel the combined company into third place in the 2015 ranking. CBRE Global Investors dropped one place to fourth, while Brookfield Asset Management and The Blackstone Group kept their first and second place positions respectively from last year. The average AUM for the four largest managers stood at over EUR100 billion. UBS Asset Management, AXA Investment Managers - Real Assets, JP Morgan Asset Management, Invesco Real Estate, Pramerica Real Estate Investors and LaSalle Investment Managers complete the top ten.
Henri Vuong, INREV’s Director of Research and Market Information, says: “These results show that the non-listed real estate market remains buoyant. Very few of the participating fund managers saw a significant drop compared to 2014, while at the top end both Brookfield and Blackstone are between 50 per cent and 100 per cent larger than they were three years ago.”
In terms of how investors are choosing to access the market, it is clear that funds are still a hot favourite. Non-listed funds and private REITs account around half the total of AUM, and institutional investors make up over 80 per cent of that allocation.
Once again, pension funds were the dominant institutional investor type, with the insurance sector the second biggest player. The survey data suggests that sovereign wealth funds are becoming more active in non-listed real estate. Sovereign wealth funds were the second largest investors in joint ventures and club deals by proportion of AUM (20.7 per cent).
Vuong adds: “Investors are increasingly looking for global exposure and this has been a key driver of acquisitions as fund managers look to bring in more local market expertise. Industry consolidation continues apace and there is nothing to suggest there will be a slowdown in M&A activity in the near future. Whatever the ‘optimum’ size for a fund manager might be, we clearly haven’t reached that point yet.